Inequality and Social Rank: Income Increases Buy More Life Satisfaction in More Equal Countries

Abstract

How do income and income inequality combine to influence subjective well-being? We examined the relation between income and life satisfaction in different societies, and found large effects of income inequality within a society on the relationship between individuals’ incomes and their life satisfaction. The income–satisfaction gradient is steeper in countries with more equal income distributions, such that the positive effect of a 10% increase in income on life satisfaction is more than twice as large in a country with low income inequality as it is in a country with high income inequality. These findings are predicted by an income rank hypothesis according to which life satisfaction is derived from social rank. A fixed increment in income confers a greater increment in social position in a more equal society. Income inequality may influence people’s preferences, such that in unequal countries people’s life satisfaction is determined more strongly by their income.

Rank-based alternatives to mean-based ensemble models of satisfaction with earnings: Comment on Putnam-Farr and Morewedge (2020).

“…More recent research, however, has suggested instead that the relative ranked position of an income within a comparison set determines judgments of both wage satisfaction (Brown et al, 2008) and life satisfaction more generally (Boyce et al, 2010). The latter finding has been replicated in many countries (Macchia et al, 2020) and is consistent with effects of income inequality on income/well-being gradients (Quispe-Torreblanca et al, 2021). Similarly to PF&M, Brown et al (2008) gave students hypothetical wages but presented them in the context of different contextual wage distributions.…”

How living in economically unequal societies shapes our minds and our social lives

“…This mechanism could account for some findings that people who live in more objectively unequal social contexts report reduced wellbeing (e.g., Layte, 2012; Oishi et al, 2011; Vilhjalmsdottir et al, 2016; Zhang & Churchill, 2020). At the same time, however, a recent meta‐analysis found that the impact of inequality on wellbeing did not differ from zero (Ngamaba et al, 2018; see e.g., Delhey & Dragolov, 2014; Zhao, 2012), leading researchers to suggest that there may be important moderators of this relationship, including GDP (Ngamaba et al, 2018), individual income (Quispe‐Torreblanca et al, 2021; see also Cheung & Lucas, 2016), perceived social mobility (e.g., Sagioglou et al, 2019) and the concentration of inequality in the top or bottom of the distribution (Blesch et al, 2022; Tan et al, 2020).…”

Income Inequality, Social Comparison, and Happiness in the United States

“…In addition, the relationship between inequality and happiness can be mediated by social environment, with U.S. states with tighter controls (i.e., a greater number of strongly enforced rules and little tolerance for deviance) showing greater inequality and lower happiness relative to states with looser controls (Harrington and Gelfand 2014). Similarly, the income effect on satisfaction can be conditional on a country’s level of economic inequality, with a greater effect in a more equal society (Quispe-Terreblanca et al 2020).…”